New Executive Order Makes Fixed-Price Contracts the Government’s Default

On April 30, 2026, President Donald Trump issued an Executive Order, “Promoting Efficiency, Accountability, and Performance in Federal Contracting” (the “EO”), directing agencies to make fixed-price contracting the default and preferred approach for federal procurement. The EO is not a ban on other contract types, such as cost-reimbursement or time-and-material vehicles, but, as we discussed in our prior Legal Update, it is another step in the government’s effort to procure on faster timelines, and behave more like a commercial buyer. Under the EO, when agencies want to use other contract types, they must justify their reasoning in writing and obtain senior-level approval above specified thresholds. Agencies must also review large existing non-fixed-price contracts for possible conversion toward fixed prices and performance-based incentives.

The bottom line for contractors: expect more fixed-price solicitations, more performance-based metrics, and more pressure to define requirements and allocate risk before award. For those holding significant other-than-fixed-price vehicles, expect the government to scrutinize whether those contracts should be converted to fixed price.

What the EO Does

The EO makes fixed-price contracts with performance-based considerations the default and preferred method of procurement. The rationale is that fixed-price contracting works best in almost all scenarios where outcomes, deliverables, timelines, and prices are clearly defined, while cost-reimbursement contracting can reduce incentives to control costs, leading to over-budget, delayed deliveries.

Contracting officers must now justify in writing to the agency head non-fixed price contracts above certain dollar thresholds, including cost-reimbursement, time-and-materials, labor-hour, and other non-fixed-price contract types. Agency-head approval is required at $100 million for Department of War contracts, $35 million for NASA contracts, $25 million for DHS contracts, and $10 million for other agencies. That approval authority can be delegated, but only to a non-career official. The approval requirement does not, however, apply to contracts supporting emergency, major disaster, or contingency responses, or to research and development or pre-production development for major systems acquisition.

The EO also impacts existing contracts. Within 90 days, each agency must review its ten largest non-fixed-price contracts and, where practicable and consistent with law, seek to modify, restructure, or renegotiate them to use fixed prices and performance-based incentives.

Why It Matters to Contractors

The EO is not a categorical ban on other-than-fixed-price contracting, but it is a meaningful shift in procurement mindset. Agencies will start each acquisition with the presumption of fixed-price, and will need a very good reason to opt otherwise. This approach could lead to cost-savings for the government, but it will also require more work on the front end for agencies to clearly define their requirements and apply judgment when evaluating the reasonableness of any proposed price.

Implementation could be bumpy. Fixed-price contracting works best when the agency can define outcomes, dependencies, acceptance criteria, and performance metrics. When it cannot, that same uncertainty and risk often leads to higher pricing, more restrictive pricing assumptions, or performance disputes about whether a specific cost impact is a risk that was, or was not, included in the proposed fixed price. It may take some time, dialogue with industry, and, likely some disputes as agencies and industry adapt to the new rules of the road. But, at least in theory, it could result in a procurement system that more closely resembles the commercial marketplace.

What Contractors Should Do Now

Contractors should inventory existing contracts and opportunities for cost-reimbursement, time-and-materials, labor-hour, and hybrid arrangements that may be affected, especially large-dollar programs that could fall within an agency’s top 10 non-fixed-price contracts. They should also identify any work that may fit the EO’s exception categories, including emergency, disaster, contingency, research and development, and pre-production development work.

For requirements that contractors believe should remain under a non-fixed-price vehicle, contractors should be prepared with a clear explanation for why fixed pricing would be impracticable or inefficient, what uncertainties remain, and what cost and performance controls already exist. For requirements moving toward fixed price, contractors should give considerable thought to proposal assumptions and performance metrics before executing any modifications.

Contractors should also update internal approval processes for accepting fixed-price and performance-based risk and monitor OMB guidance, FAR Council activity, agency deviations, and solicitation-specific instructions.

Conclusion

The EO fits within the Trump Administration’s larger effort to reform federal procurement and limit the number of programs that go over budget. It also creates opportunities for contractors that can price risk clearly and intelligently. At the same time, it increases risk for contractors that do not take the mindset shift seriously. Contractors should take steps now and give serious attention for how this shift could affect existing contracts and opportunities, as well as the larger, strategic-level considerations for operating in this new environment.